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The Million Dollar Mistake


Our Society Is Brainwashed Into Believing That You Should Work Until You Hit Your Factor And Then Retire With No Consideration For Each Person’s Unique Situation.


It's a significant error of omission. And most people make the error because they don’t know that there are options with their pension at retirement beyond the five or six listed on the sheet that they receive from HR.

At today’s low-interest rates, a person that leaves the public sector just before their 55th birthday* and has worked there their whole life with a best five average salary of just $75,000 per year can receive a lump sum payout, rather than monthly pension cheques for life, of more than $1,100,000. Up to a legislated maximum, this money can be transferred into a Locked-In Retirement Account (LIRA), with the excess beyond the RRSP carry forward room being taxable. This can result in a very large tax bill, but the after tax money can be used to pay down or eliminate debt. Another alternative is to invest the after tax money to supplement retirement income. Some people have used this money to start a business.

One thing is clear however, the motivation for this should not be because you or a financial advisor believe that you can achieve a consistently higher rate of return than one of the large, well-managed public sector pension plans in Ontario. By the same token, you should also take their caution about high management fees with a grain of salt – it is the net return that matters and there are investments that have long track records with comparable net returns to the pension plans.

So, if investment returns are not the tail that is wagging this dog, then what should be the motivation? Your unique situation and the flexibility that a large pool of money can provide you in addressing them.

  • Some people find themselves in their early 50s with six-figure debt and no light at the end of the tunnel in terms of paying it off.

  • For others, especially those who are widowed or divorced with children, it is the realization that without a spouse your pension usually dies with you leaving nothing behind for your family.

  • But for many people, they just want or need to change careers or perhaps take a sabbatical. These people are counting down the days until they earn 85 or 90 points as the case may be so that they can qualify for an unreduced pension. Often they don’t know if it will be enough and when it isn’t we see them back at work somewhere else because they need the money.

But our society is brainwashed into believing that you should work until you hit your factor and then retire with no consideration for each person’s unique situation.

The problem is that most don’t have a plan that starts with defining what it is that they want to do, when they want to do it and how much it is going to cost.

No plan and not being educated about all of the options to make that plan a reality is for too many public sector workers in Ontario the Million Dollar Mistake. If you don’t want to make the Million Dollar Mistake, let's connect.


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